Corleone
Fish Herder
No, it's because of the banking system - there's a lot more money moving around than exists at any given time because of the money multiplier. Corporations and consumers borrow from investors and banks, banks borrow from national banks as well as corporations and consumers (in the form of private accounts), national banks borrow from the world banks.
The problem isn't that the money's disappearing, it's that it isn't moving - movement is what matters more than volume, there's theoretical models in which a single dollar can drive the entire world economy if the reserve rate is low enough, and the fun thing is, everybody can still have thousands of dollars in their bank accounts. Corporations and consumers start to default on their debts, so the banks they borrowed from need to borrow from higher banks to cover accounts, which just daisy chains the problem up the line. Basically, until somebody can scrape up enough money to start paying their debts, nobody has money to pay their debts. When debts can't be covered, banks and investors don't extend new credit, so investment goes down and corporations have an even harder time of it.
Governments aren't making bank on taxes, either - government reserves (and debts) are a part of the same system, so they get hit just the same. Literally, when everybody's going down in the economy, EVERYBODY is going down, the winners who manage to skim off the top and take big severance packages are then stuck with banks that can't cover their money, a stock market that isn't safe for it, and a market that gives them nothing to spend it on. During the Great Depression, the US government literally paid one group of people to dig ditches all over the country, then a second group to fill in ditches all over the country (guess where they got the ditches?), just to make money move.
The problem isn't that the money's disappearing, it's that it isn't moving - movement is what matters more than volume, there's theoretical models in which a single dollar can drive the entire world economy if the reserve rate is low enough, and the fun thing is, everybody can still have thousands of dollars in their bank accounts. Corporations and consumers start to default on their debts, so the banks they borrowed from need to borrow from higher banks to cover accounts, which just daisy chains the problem up the line. Basically, until somebody can scrape up enough money to start paying their debts, nobody has money to pay their debts. When debts can't be covered, banks and investors don't extend new credit, so investment goes down and corporations have an even harder time of it.
Governments aren't making bank on taxes, either - government reserves (and debts) are a part of the same system, so they get hit just the same. Literally, when everybody's going down in the economy, EVERYBODY is going down, the winners who manage to skim off the top and take big severance packages are then stuck with banks that can't cover their money, a stock market that isn't safe for it, and a market that gives them nothing to spend it on. During the Great Depression, the US government literally paid one group of people to dig ditches all over the country, then a second group to fill in ditches all over the country (guess where they got the ditches?), just to make money move.
